Surging oil prices strain MSMEs, prompt price hikes and delays

By Beatriz Marie D. Cruz, Senior Reporter

MICRO, small and medium enterprises (MSMEs) are raising prices and delaying shipments as higher oil prices driven by Middle East tensions push up logistics and production costs, industry players said.

“We’re not going to make money because our logistics cost is 10% of the price,” Brian Enriquez, owner of Basket Trend Home Products, Inc., told BusinessWorld on the sidelines of a Trade department food fair last week.

Mr. Enriquez, who sells handwoven baskets from Rizal, said export costs have surged, forcing the company to pause shipments to the US.

“The cost to send a container to the US also increased by almost 300%,” he said, adding that buyers are holding off orders while waiting for freight rates to ease.

Small food producers are also adjusting prices to keep pace with rising input costs.

“The cost of all our raw materials has increased,” said Salve San Juan, founder of Bicol-based Golden Mama, known for bottled laing, Bicol express and other regional products.

Ms. San Juan said packaging costs, particularly for glass bottles, have risen alongside fuel prices, forcing the company to increase retail prices. Bottled products now sell for about P180 from P165, while resellers have begun placing smaller orders.

“We cannot keep our prices steady,” she said.

Logistics costs have also climbed for Davao-based Bec and Geri’s, Inc., which produces plant-based coffee products.

“Especially for the logistics side of shipping our products from Davao to anywhere in the Philippines, there was really an increase in costs,” said Martin Evangelista, the company’s sales director.

The company raised the price of its purple corn coffee to P350 from P295 to offset higher delivery expenses.

“Because of this crisis, we really have to increase our price to support our expenses for logistics,” he said.

The Philippines’ reliance on air and sea transport exposes small businesses to fuel-driven cost swings, with shipping and airfare adjustments adding to the burden.

The Maritime Industry Authority said ship cargo rates might increase by as much as 30%, while the Civil Aeronautics Board raised the passenger fuel surcharge to Level 8 this month, allowing airlines to impose higher fees on domestic flights.

These increases feed into the cost structure of MSMEs, which typically operate on thin margins and have limited capacity to absorb shocks.

Diana R. Rueda, an economics professor at the University of Asia and the Pacific, said rising oil prices affect both production and distribution costs, putting pressure on smaller firms.

MSMEs, which account for about 99% of businesses in the Philippines and contribute roughly 40% of gross domestic product, are particularly vulnerable to external shocks.

Still, Ms. Rueda said shifting consumer behavior during periods of high fuel costs could benefit certain segments.

“Sari-sari (mom-and-pop) stores, neighborhood groceries and home-based food businesses are also well-positioned to thrive as consumers prioritize convenience and reduce long-distance travel,” she said in a Viber message.

She added that repair and maintenance services such as motorcycle servicing and clothing alterations might see stronger demand as households and businesses look for ways to cut costs.

MSME TRAVEL DISCOUNTS
Meanwhile, sea travel operator 2GO Group, Inc. has partnered with the Department of Trade and Industry to offer discounted fares and logistics support to MSMEs participating in government-backed trade fairs.

“This collaboration allows both established and aspiring MSMEs to tap into our sea travel network,” 2GO Travel Business Unit head Francis John Chua said in a statement on Tuesday. “This actually means that starting and growing your own business has never been easier.”

Under a memorandum of agreement, the partnership aims to help small businesses expand their market reach by lowering travel costs and improving access to transport and cargo services, 2GO said.

The company said it would provide special discounted rates for MSMEs attending official trade fairs, along with exclusive cargo services to support product distribution across regions.

Trade Undersecretary Blesila A. Lantayona said the partnership would strengthen the visibility of Filipino products nationwide.

“This initiative strengthens the presence of Filipino products beyond their home regions and enables MSMEs to reach more consumers nationwide, with sea travel supporting their growth and mobility,” she said.

Under the deal, 2GO will also expand its One Town, One Product Nooks — dedicated spaces for local goods aboard passenger vessels — across its fleet.

The expansion is expected to provide MSMEs with more channels to promote and sell their products directly to travelers.

2GO said the partnership aligns with efforts to support MSME development by improving access to markets and logistics infrastructure, which remain key challenges for small enterprises operating in an archipelagic country.

The company provides a range of services including sea travel, freight forwarding, warehousing, distribution and e-commerce logistics.

Earlier this month, 2GO partnered with the Philippine Coast Guard to provide travel discounts to retired personnel and their families, while supporting logistics requirements such as the transport of humanitarian and relief goods.

The company said it continues to explore partnerships that enhance mobility and logistics support for both public and private sector stakeholders. — with Ashley Erika O. Jose